Here’s a local TV News segment on a local couple who have learned to live within their means. How?

Driving older, paid-for cars; eating at home; paying off credit cards, and perhaps most important of all: saving money.

Good for them — exactly the sort of “pull-yourself-up-by-your-own-bootstraps” recipe I recommend to my clients.

Watch the video for the financial experts — one of whom cautions that we shouldn’t go too far with this sort of thing. (Hah! What nonsense. Take care of your family first; the economy will take care of itself.)

It made me think of a book I listened to a couple years ago entitled, The Millionaire Next Door.

In that book two academics systematically studied the habits of real millionaires around the country and found that by and large, they lived VERY frugal lives — driving older cars, not borrowing money, saving, and not living ostentatiously. Nelson Bunker Hunt – the silver speculator and billionaire was famous for flying coach (first class was too expensive, he thought). More recently, Warren Buffet is also known for his very frugal lifestyle.

Want to be rich? It’s pretty simple. Do as the rich do. Don’t borrow money. Don’t waste money. Most important of all: save, save, save.

Want to be poor like everyone else? Just keep doing what you’re doing.

FBC

Kudos to Scott Thompson, the NewsOn6, and of course, the Ball family.

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I’m introducing a new blog series today that I’m calling “Real Bankruptcy, Real Life.” These are going to be blog posts about real-life questions that arise during the course of my practice. If you have a question you’d like me to address, give me a call at 918 582-6131 — I’d be glad to help! — Ben Callicoat

***

Had a client call me the other day whom I’d spoken to previously. As always, I try to help people realize that bankruptcy is not the ONLY option they have — but instead an emergency tool of last resort to be used in extreme situations only. Bankruptcy is the parachute you pull when the fourth engine of your financial airliner has caught fire and you’re going down. And in fact I’d recommended that this particular client avoid filing a bankruptcy case — not the least of reasons being that his social security benefits were the only source of income and therefore exempt from attachment or execution.

Let me to take half a step back here and explain.

GarnishmentandExempt Property

When you’re being sued for indebtedness (because you are not paying some debt that is owed) the plaintiff’s purpose is to get a judgment (a court decision and order) to force you to pay them. In order to collect on this judgment, the plaintiff will usually have to find some assets or property to attach. They do this by garnishment — issuing a court order to someone holding property (such as a bank or an employer) also known as a “garnishee”, for the judgment debtor. The court orders the garnishee to turn over the funds in that account to the judgment creditor / plaintiff.

However, among other defenses, each state has a set of exemptions — laws that make certain property exempt from being taken from you to satisfy a debt. The law recognizes that some things are too basic, too important to being subject to seizure — usually the basic necessities of life: food, shelter, clothing, for instance.

Oklahoma’s excellent exemption statutes — principally found at Oklahoma Statutes 31 O.S. sec. 1, and following, set forth all of the property interests that the Oklahoma legislature has decided a creditor should NOT be able to get in order to satisfy a judgment. For instance, under Oklahoma law your home and your home furniture are exempt. Also exempt is 75% of your income — reason being, a person needs income lest they become wards of the state. (See OSCN link above.)

Beware “free” Legal Advice

So back to the story. The client having previously been advised (by yours truly) that his Social Security was safe from attachment, calls me one recent morning and says that his brother is a bank president. And that he, his brother, and another close friend — by happenstance a retired attorney — were talking about my advice, and the bank president told my client that I was wrong: his Social Security WAS in fact able to be garnished from his bank account, contrary to what I’d said. And to make matters worse, their mutual friend the retired attorney agreed with the bank president brother.

Whoa! Trouble in River City, Bankruptcy-Man! Had I given this man bad advice? Was I mistaken somehow? Are social security benefits exempt from being attached or not? All of these questions that were raging in someone’s mind, if not my own.

Nonetheless, I knew that my previous advice was correct in spite of the fact that two people who should know disagreed with me. (One of them a lawyer!) But I stuck to my guns anyway. “They’re wrong” I told the client flatly. “Your brother and the lawyer are just flat wrong.” I repeated.“I will look up the exemption statute and call you back,” I promised the client.

Ultra Thin’s fact pattern is substantially similar to my client’s query: a judgment creditor had sought a garnishment against a debtor’s bank account which had contained social security benefits held for his grandson. On the court’s order, the garnishee bank had seized the contents of the account and forwarded them to the judgment creditor. The judgment debtor appealed this seizure on the grounds that the source of the funds was social security benefits which were exempt from attachment by reason of tit. 47 U.S. Code section 407, et seq.

Social Security Benefits Exempt from Garnishment

The Oklahoma Court of Appeals agreed. Social Security benefits are exempt under the federal law cited. In its opinion, the court specifically cites several federal court of appeals cases which held that not only were social security benefits from attachment or execution, they were even exempt after they had been commingled with other non-exempt funds. Case closed.

A quick call back to the client to confirm: “I was right; your brother and lawyer friend are wrong.” “Social Security benefits are 100% exempt from attachment or garnishment.” A creditor is prevented by federal law from seizing these funds to satisfy a judgment even when a court orders otherwise. Dead bang correct.

Moral of the Story: Don’t try this at home

The law is complicated and it changes or evolves with each new opinion or court decision on a given topic. Lay people often mistakenly assume that the law is a simple “cut and dried” matter, when in fact it is not. If the law were that simple, lawsuits could be decided by computer programs. As it is, facts and context matter greatly.

Another lawyer I consulted later — a creditor’s lawyer who had spent years of litigating exactly these sorts of cases — confided that he had long ago attempted to argue that once the funds were commingled with other non-exempt funds, that they lost their exemption. (He admitted that he had lost those arguments, even back then, however.)

Nonetheless it points out the dangers of relying on other people for your legal advice. Your brother in law who just passed the bar is probably not qualified to answer this relatively simple question unless he has just recently researched this precise question. Even a long-practicing attorney in another field is probably not qualified to say. Similarly, the retired attorney friend of my client in this real-life example, had either not looked at this issue recently, or never looked at this issue and was apparently shooting from the hip when he agreed with their banker friend. And if you’re going to rely on non-lawyers — even if it is your brother (maybe I should say “especially” if it is your brother) for legal advice, I don’t know what to tell you — that’s just plain crazy.

It all goes to show, as the ever-wise late, great favorite son of Oklahoma Will Rogers once said, “It’s not what folks don’t know that’s the problem. It’s what they know that just ain’t so.”

Ah yes — that’s it exactly, Will.

Again, if you have a particular debt problem that you need some competent advice about, please call me at 918 582-6131 or send me an email: fbcallicoat@jarboelaw.com. I’m all about helping people and would love to help you as well. fbc

Weasel Words Disclaimer

Disclaimer (a/k/a “Weasel Words”): This is NOT legal advice. This is a general interest blog post. If you haven’t paid me a retainer, I’m not your lawyer. And come to think of it, if you are relying on a blog for legal advice without speaking to a lawyer, you are stupid. Or crazy. Or maybe both. You deserve every bad fate which will almost certainly befall you. In fact, please put this blog post down and back away slowly. Thank you.

To say I’m a big believer in Dave Ramsey and his “advanced common sense” approach is an understatement. He’s awesome. He’s right. And he’s freeing people from the bondage of debt on a daily basis.

So tonight I finally dragged my wife to a local Financial Peace University class — a 13 session DVD class that lays out the Ramsey Financial Peace plan. Very exciting!

Now, some might wonder about a bankruptcy lawyer who promotes Dave Ramsey. Isn’t that like a field-mouse running a red-tailed hawk fan club? A seal who promotes killer whale worship? A rabbit being a hunting dog groupie?

Nah, actually Ramsey and I both agreeon this point: bankruptcy is very, very painful. And it is not the cure-all to debt problems. Let me repeat that last point:

BANKRUPTCY IS NOT A CURE FOR DEBT PROBLEMS

Shocking? Well, maybe. But years of watching bankruptcy clients come and go has led me to the understanding that something important is missing. Something is not working the way it should.

Why do I say that? Why wouldn’t eliminating your unsecured debt be a huge head-start to getting your life in financial shape?

Well, because as Ramsey says, “Personal Finance is about behavior.” Of course if you file a Chapter 7 bankruptcy, you CAN get out of debt. Maybe even quicker than Ramsey’s famed Debt Snowball technique. (MAYBE – see article comments. fbc)

So why doesn’t it work? Why don’t my Chapter 7 clients find that bankruptcy is a life-changing experience — in a good way, I mean?

Because they don’t change the behaviors that brought them to me in the first place. If they file bankruptcy, they don’t have to budget, they don’t have to work with their spouse, and they don’t have to learn to save for emergencies.

So when they take the short-cut of Chapter 7, they bypass a lot of important lessons and habits they need to instill to ensure success.

Now, none of this is to say that bankruptcy is unnecessary. Nor did I say or imply anywhere that people who are filing bankruptcy are “deadbeats” or somehow unsavory. (Quite the contrary — my experience shows that most people would gladly cutoff their right arms if they could avoid bankruptcy.) They just don’t see how that is possible. And they wait too long to take action. Many of them are already being sued by creditors or even having their paychecks garnished. These are NOT deadbeats. They’re people who’ve made a couple of unwise decisions with money, and gotten trapped.

No – they’re not deadbeats; they’re good people with families and homes and dreams. They are professionals and housewives, mothers and fathers, blue collar and white collar. They are university educated, many of them. They’re not stupid. They’re not crooked. (Something I can’t say about insurance companies and some credit card banks, by the way, many of whom have “lie, cheat, and steal” as a part of their business plans.) No, my clients aren’t the bad-guys. They’re just people who don’t know how to find Financial Peace.

I’m going to be blogging about my experiences in Dave Ramsey’s Financial Peace University class over the summer. Please come along and follow me as I dive in.

If you need some Financial Peace; if you’re one of those good solid people who have nonetheless found themselves in extreme financial distress — give me a call. I’ll try to find a way out of your predicament and get you set back on the road to financial strength. I’ll also try to map a way out that doesn’t include bankruptcy. But sometimes, bankruptcy is all there is left. In that case, at least you’ll know that you didn’t really have another choice and that you did all you could to avoid it.

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It’s an unfortunately an increasingly common problem. You were behind on your house payments — maybe you lost your job, or had some extraordinary medical expenses. Perhaps you recently suffered through an expensive divorce, and you’re now having to survive on less income.

Whatever the reason, you’ve spent the last several months “robbing Peter to pay Paul” — doing the best you could, paying the bills that you could with the resources you had. But you just couldn’t hold it all together and today you’ve been served with a foreclosure petition? Now what? What can you do?

Several things, actually. Given the right circumstances, you may well be able to save your home from foreclosure.

Foreclosure: What it means

Foreclosure is the legal mechanism by which the mortgage holder (usually a bank or mortgage company) gains legal title to a piece of real estate from the borrower who has defaulted on the terms of the original agreement. When you borrow money to finance the purchase of a home, you granted the bank or mortgage company, a “mortgage” — the legal right to repossess the property itself, if you failed to keep making the payments. We call this failure to make payments a “default”.

Unlike the bank who holds a car note or promissory note for some other piece of personal property, a mortgage holder / creditor cannot merely “repossess” your home if you default on the contract. They have to “foreclose” (or to get back) their interest in your property in order to be able to get possession of it and sell it to someone else. State laws understand how important home ownership is in a free society, and therefore every state has laws to protect people from losing their homes too quickly or, as lawyers say, without “due process.” (Note that there is a special kind of mortgage called a “power of sale mortgage” which ostensibly gives the mortgage holder a short-cut to foreclosure. Fortunately for Oklahomans and the residents of many other states, a homeowner can opt out of the “power of sale” foreclosure, and thus they’re rarely used here.)

OK, so you’ve got the terminology down. The next thing to understand is that you’re being sued. Bad as that may seem, however, it is not without it’s “up-side”, insofar as with any lawsuit, you have certain rights and abilities to defend yourself. And, the plaintiffs — in this case presumably the mortgage holder — has to fulfill certain minimal requirements before they win.

IF — that is — you fight back.

If on the other hand, you do nothing, then you’ve already lost. You might as well call the movers or the in-laws and prepare to leave. Fortunately, that probably doesn’t apply to you because if that were the case, you wouldn’t be reading this blog post.

Fighting Back

In a lawsuit, the plaintiff — the person or company who is suing you — can win by default only if you don’t defend yourself. One of my law school professors — an émigré to the United States from Eastern Europe — used to harangue us complacent Americans for not realizing that the beauty and nobility of our judicial system is that it provides a man the ability to defend himself. But defend yourself, you must. For if you don’t, no one else will do it for you. And just as you would lose a fist-fight by not fighting back, so will you lose a lawsuit in the same manner. Because, at bottom, a lawsuit is indeed a fist-fight — but one whose consequences go way beyond any schoolyard scuffle.

In every lawsuit, the Defendant (that would be the homeowner in this example) has a certain amount of time after being served in which to “answer” (or defend) the suit. The summons will tell you how long you have to do so — either 20 or 35 days from the date of service, depending on which the Plaintiff elects to allow.

Further, a Defendant has the right under Oklahoma law to extend that time by filing an Entry of Appearance and Request to Extend Time which will gain the Defendant an additional 20 days time to file their answer. (See 12 O.S. sec. 2012(A)(1)(b)).

Watch for Foreclosure: What do I do now? (Part 2) to be posted

If you are facing foreclosure or other serious collection related problems with creditors, call me for assistance. I am a bankruptcy professional with years of experience in this field. I love my work, and I love my clients. And they love me.

Ben Callicoat

918 582-6131

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It’s an unfortunately an increasingly common problem. You were behind on your house payments — maybe you lost your job, or had some extraordinary medical expenses. Perhaps you recently suffered through an expensive divorce, and you’re now having to survive on less income.

Whatever the reason, you’ve spent the last several months “robbing Peter to pay Paul” — doing the best you could, paying the bills that you could with the resources you had. But you just couldn’t hold it all together and today you’ve been served with a foreclosure petition? Now what? What can you do?

Several things, actually. Given the right circumstances, you may well be able to save your home from foreclosure.

Foreclosure: What it means

Foreclosure is the legal mechanism by which the mortgage holder (usually a bank or mortgage company) gains legal title to a piece of real estate from the borrower who has defaulted on the terms of the original agreement. When you borrow money to finance the purchase of a home, you granted the bank or mortgage company, a “mortgage” — the legal right to repossess the property itself, if you failed to keep making the payments. We call this failure to make payments a “default”.

Unlike the bank who holds a car note or promissory note for some other piece of personal property, a mortgage holder / creditor cannot merely “repossess” your home if you default on the contract. They have to “foreclose” (or to get back) their interest in your property in order to be able to get possession of it and sell it to someone else. State laws understand how important home ownership is in a free society, and therefore every state has laws to protect people from losing their homes too quickly or, as lawyers say, without “due process.” (Note that there is a special kind of mortgage called a “power of sale mortgage” which ostensibly gives the mortgage holder a short-cut to foreclosure. Fortunately for Oklahomans and the residents of many other states, a homeowner can opt out of the “power of sale” foreclosure, and thus they’re rarely used here.)

OK, so you’ve got the terminology down. The next thing to understand is that you’re being sued. Bad as that may seem, however, it is not without it’s “up-side”, insofar as with any lawsuit, you have certain rights and abilities to defend yourself. And, the plaintiffs — in this case presumably the mortgage holder — has to fulfill certain minimal requirements before they win.

IF — that is — you fight back.

If on the other hand, you do nothing, then you’ve already lost. You might as well call the movers or the in-laws and prepare to leave. Fortunately, that probably doesn’t apply to you because if that were the case, you wouldn’t be reading this blog post.

Fighting Back

In a lawsuit, the plaintiff — the person or company who is suing you — can win by default only if you don’t defend yourself. One of my law school professors — an émigré to the United States from Eastern Europe — used to harangue us complacent Americans for not realizing that the beauty and nobility of our judicial system is that it provides a man the ability to defend himself. But defend yourself, you must. For if you don’t, no one else will do it for you. And just as you would lose a fist-fight by not fighting back, so will you lose a lawsuit in the same manner. Because, at bottom, a lawsuit is indeed a fist-fight — but one whose consequences go way beyond any schoolyard scuffle.

In every lawsuit, the Defendant (that would be the homeowner in this example) has a certain amount of time after being served in which to “answer” (or defend) the suit. The summons will tell you how long you have to do so — either 20 or 35 days from the date of service, depending on which the Plaintiff elects to allow.

Further, a Defendant has the right under Oklahoma law to extend that time by filing an Entry of Appearance and Request to Extend Time which will gain the Defendant an additional 20 days time to file their answer. (See 12 O.S. sec. 2012(A)(1)(b)).

Watch for Foreclosure: What do I do now? (Part 2) to be posted

If you are facing foreclosure or other serious collection related problems with creditors, call me for assistance. I am a bankruptcy professional with years of experience in this field. I love my work, and I love my clients. And they love me.

Ben Callicoat

918 582-6131

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Great post over at Forbes by a top attorney for one of the largest most prestigious firms in the world. The subject? How the time-tested, age-old law practice standby, the billable hour, must be eliminated.

This is a topic we’ve been kicking back and forth at Jarboe & Stoermer for some time now. The problems with billable hours are legion, but just to name two off the top: first, that there is something fundamentally unfair about charging the same rate for sending an email or checking my schedule on behalf of a client, as we do arguing a motion in court. Why should both activities — the latter of which is the product of the cumulative weight of years of practice and skill, and the former which could be done by any fool with a keyboard and an internet connection — be charged at exactly the same rate?

For another objection, the overhead and lack of productivity that trying to keep track of time builds in is highly counterproductive. Some estimate that tracking billable hours adds a non-productivity cost of up to 10% to any given work product. (I actually think it a bit higher.)